Cover Story
DO’S & DON’TS
Do’s
• Maximise your pension
Ian Browne, pensions expert at Quilter,
on how to prepare for a 120-year life
• Seek financial advice.
Retirees who have seen
Don’ts
an adviser, even just once, • Rely on state pension for
contributions and don’t have, on average, £7,000 the early years of your
underestimate how much more a year to spend in retirement. The state
you will need. If you earn retirement. pension age is due to rise
£45k and put 5 per cent
in your pension from your
to 67 by 2028 and 68 by
• Start saving early. The
2046, meaning people will
early 20s until you are 65, best way to supercharge need to work for longer
you will have just £5k a your savings is to start as until they can access state
year if it is to last until you early as possible and give retirement support.
are 120. You would need your money more chance to put in about 20 per to grow. This is primarily cent of your salary to have because of compound pension if you are self-
£20k a year in retirement. interest, the snowball employed. The self-
A good rule of thumb is to effect that occurs when employed expect to have
invest half your age. interest is added to your £2,700 less per annum
savings or investments. in retirement than their
• Put off saving into a
employed peers.
• Think about working
for longer if possible.
• Enter into non-advised
Retirees who continue drawdown without
to work part-time in understanding the full
retirement have £1,700 ramifications of what a
per annum more than bad decision could cost
those who don’t. you. Due to pension
freedoms, consumers
• Assess whether it is
FE TRUSTNET
[ RETIREMENT PLANNING ]
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can now access 25 per
prudent to use your cent of their pension pot
own property to fund tax-free, which can have
retirement. Just 8 per a detrimental effect on
cent of current retirees the remainder of their
do this. Equity release can pot if they don’t invest
help unlock wealth. appropriately.
“Social & intellectual advantages”
Brooks says that many of his clients
now take a “soft” retirement, working
into their 70s for two or three days
a week. This has other social and
intellectual advantages, which can
help improve quality of life.
Michael Martin, private client
manager at Seven Investment
Management (7IM), says that being
savvy about how wealth is structured
can add significantly to the overall pot:
“You will also have to minimise your
tax expenditure to make your money
stretch further. If you’re married, work
as a couple. With the ISA allowance
at £20,000 a year, a couple can
comfortably build £650,000 into their
ISAs over the 10 years leading up to
retirement with modest growth. Once
retired, you can draw some of that
down each year tax-free.”
He admits this means putting money
in all the right places in the build-up
to retirement and planning for a 100-
year life at 50.
“With the ISA allowance
at £20,000 a year, a couple
can comfortably build
£650,000 into their ISAs
over the 10 years leading up
to retirement with modest
growth”
and more likely to suffer life-limiting
conditions, will be to annuitise part
or all of their remaining pot. Many
advisers already advocate this mix-
and-match approach today.”
The 120-year life may be some way
off, but it doesn’t hurt for people to
over-estimate how much they will
need in retirement. The worst that can
happen is that people will have too
much to spend – now that would be a
nice problem to have.
Fashion victims
While they are no longer fashionable
in the age of pension freedoms,
anyone living to 120 would get
astonishing value out of an annuity.
However, if 120 becomes the norm,
Selby says the income from annuities
would drop: “For many the right
route, particularly as they get older
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